MORGAN STANLEY: Here Are 40 Stocks That Should Grow No Matter What

Thursday

Sep 26, 2013 at 4:30 PM

Morgan Stanley is out with a new report on "secular growth" stocks. That is, 40 stocks that are expected to grow independent of the fluctuations of the business cycle.

Tech stocks make up 40% of the list, playing into "Cloud, Social, Mobile, and Big Data themes." The next most common stock is retail at 18% featuring restaurants, online retailers, and performance apparel.

"Morgan Stanley analysts believe that the names selected for this report can grow strongly even if the global economy grows more slowly than our current, below-trend GDP forecasts," according to the report.

Note: The EPS growth is the projected compound annual growth rate (CAGR) from 2012-2015, the PE estimates are based on 2013 Morgan Stanley research expectations, and the PEG ratio refers to the price-earnings to growth ratio which is an indicator of the stock's valuation. Growth stocks with lower PEGs are generally considered cheaper.

21st Century Fox

Ticker: FOXA

EPS growth: 13.4%

PE 2013: 21.6

PEG ratio: 1.6

90% of growth will come from "well-positioned TV assets" in Morgan Stanley's view, according to Benjamin Swinburne.

Source: Morgan Stanley

Alexion Pharmaceuticals

Ticker: ALXN

EPS growth: 34.6%

PE 2013: 37.7

PEG ratio: 1.1

"The focused orphan drug business model is increasingly being recognized as highly sustainable and attractive, with Alexion being a bellwether in this area of Biotechnology," according to Morgan Stanley's David Friedman.

Source: Morgan Stanley

Amazon.com

Ticker: AMZN

EPS growth: NM

PE 2013: 662.7

PEG ratio: NA

"We expect Amazon to benefit from the continued shift of consumer spending to online/mobile from traditional brick-and-mortar retail," writes Morgan Stanley's Scott Devitt.

Source: Morgan Stanley

athenahealth

Ticker: ATHN

EPS growth: 26.4%

PE 2013: 113.7

PEG ratio: 4.3

"Continued mid-term stimulus spending on Healthcare IT over the next few years position ATHN to benefit from Healthcare IT secular growth story," according to Morgan Stanley's Ricky Goldwasser.

Cognizant is a "strong player in a fast-growing industry that benefits from increasing global demand for high- quality, lower-cost IT services from outside providers," according to Morgan Stanley's Katy Huberty.

Source: Morgan Stanley

Dunkin Brands Group

Ticker: DNKN

EPS growth: 17.3%

PE 2013: 28.9

PEG ratio: 1.7

"Dunkin’s all-franchised business model achieves the highest margins and returns in the industry," writes Morgan Stanley's John Glass.

Oceaneering International will be a "beneficiary of secular growth in deepwater oilfield development, increased water depth and reservoir complexity, and increased focus on field maintenance and asset integrity," according to Morgan Stanley's Ole Slorer.

"We think Pandora's best-in-class streaming music service should help it disproportionately benefit from the shift in listening from broadcast to digital channels," writes Morgan Stanley's Scott Devitt.

Source: Morgan Stanley

priceline.com

Ticker: PCLN

EPS growth: 26.1%

PE 2013: 24.7

PEG ratio: 0.9

Devitt writes that "offline-to-online shift in global hotel bookings still has a long runway for growth."

Source: Morgan Stanley

QLIK Technologies

Ticker: QLIK

EPS growth: 49.2%

PE 2013: 99.4

PEG ratio: 2.0

Rising demand for data discovery and QLIK’s upcoming QlikView Next release should broaden its enterprise appeal and drive sustained 20%-plus growth through C2014," according to Morgan Stanley's Keith Weiss.

Source: Morgan Stanley

Roadrunner Transportation

Ticker: RRTS

EPS growth: 23.5%

PE 2013: 19.1

PEG ratio: 0.8

With a potential for increased M&A activity and "margin expansion potential," Morgan Stanley's William Greene writes that Roadrunner has organic revenue growth opportunities.

Source: Morgan Stanley

Salesforce.com

Ticker: CRM

EPS growth: 22.8%

PE 2013: 153.2

PEG ratio: 6.7

"Salesforce offers leading solutions across Sales, Service, Marketing and Platform as a Service (PaaS), with each capable of scaling to $1 billion-plus," according to Morgan Stanley's Keith Weiss.

Source: Morgan Stanley

SBA Communications

Ticker: SBAC

EPS growth: NM

PE 2013: 149.5

PEG ratio: NA

The wireless tower operator "is a key beneficiary of the boom in wireless data traffic which is driving carriers to invest aggressively in their networks," writes Morgan Stanley's Simon Flannery.

Source: Morgan Stanley

ServiceNow

Ticker: NOW

EPS growth: NM

PE 2013: NM (2014 estimate: 409.3)

PEG ratio: NA

"We see NOW as one of the best growth stories in software, with room for upside as new sales hires become productive," according to Morgan Stanley's Jennifer Lowe.

Source: Morgan Stanley

Splunk

Ticker: SPLK

EPS growth: NM

PE 2013: NM (2014 estimate: 338.6)

PEG ratio: NA

"The log data platform story should continue to develop apace, with Splunk seeing larger deals as it scales in the enterprise while the apps strategy drives use-case expansion and further user adoption," writes Morgan Stanley's Keith Weiss.

Source: Morgan Stanley

Starbucks

Ticker: SBUX

EPS growth: 20.8%

PE 2013: 34.8

PEG ratio: 1.7

The "category leader" in high-margin coffee, Starbucks will likely see revenue growth "driven by expansion of food and packaged good sales, acceleration of domestic store growth, [and] continued rapid international growth," writes Morgan Stanley's John Glass.

Source: Morgan Stanley

Tableau Software

Ticker: DATA

EPS growth: 8.1%

PE 2013: NM

PEG ratio: NA

"Expanding the use of a powerful analytics and visualization solution outside of the traditional business intelligence user base opens a very large market opportunity for Tableau," writes Morgan Stanley's Keith Weiss.

Source: Morgan Stanley

Under Armour

Ticker: UA

EPS growth: 23.3%

PE 2013: 53.5

PEG ratio: 2.3

Under Armour "has potential for 20%-plus revenue growth over the next several years due to new product innovation, targeted international growth, increased domestic wholesale distribution, and store expansion," writes Morgan Stanley's Kimberly Greenberger.

Source: Morgan Stanley

Urban Outfitters

Ticker: URBN

EPS growth: 21.5%

PE 2013: 19.3

PEG ratio: 0.9

For Urban Outfitters, "30% of revenue comes from eCommerce, which could conceivably be 50% in 5 years," Greenberger estimates.

Source: Morgan Stanley

Visa

Ticker: V

EPS growth: 19.8%

PE 2013: 25.9

PEG ratio: 1.3

Like MasterCard, Visa will benefit from the shift in cash/checks to electronic payments, according to Morgan Stanley's Smittipon Srethapramote.

Source: Morgan Stanley

Workday

Ticker: WDAY

EPS growth: NA

PE 2013: NM

PEG ratio: NA

Workday is a cloud-based software vendor, and Morgan Stanley's Jennifer Lowe writes the company is "well positioned to take meaningful share from legacy vendors."

Source: Morgan Stanley

Yelp

Ticker: YELP

EPS growth: NM

PE 2013: 404.2

PEG ratio: NA

"We believe Yelp’s service facilitates both local business discovery and real-time demand fulfillment, on the back of a growing shift from the traditional yellow page industry to online directory services," writes Morgan Stanley's Jordan Monahan.

Source: Morgan Stanley

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